Euphoria or Sobering?

The positive sentiment in global markets, triggered by Barack Obama’s victory in the U.S. presidential elections, is expected to impact the Zagreb Stock Exchange today, according to most analysts, who also warn that a sobering period will follow as very poor macroeconomic indicators are arriving from the largest global economies.

Of the 10 analysts from brokerage firms who participated in Hina’s survey, 6 expect the Crobex to continue rising today, while 4 anticipate its stagnation. The Crobex index jumped 7.46 percent yesterday, reaching 2,399 points. The regular trading volume exceeded 81 million kuna. “Given the optimism in global markets, we can expect a similar sentiment on the domestic exchange today. However, after the initial euphoria, it will be time for a realistic assessment of economic facts,” emphasizes Goran Vorkapić, broker and investment advisor at the brokerage firm To One.

On Wall Street, leading indices rose more than 3 percent on Tuesday, as investors breathed a sigh of relief with the end of the uncertain and prolonged battle for the White House and because they hope for a strong price increase typical for the end of the year. Stock prices on Asian exchanges also surged this morning to their highest levels in three weeks, thanks to hopes that the new U.S. President Obama will act quickly to stimulate growth in the American economy.

However, on European exchanges, futures indices are currently in the red, and analysts point out that Obama’s victory has already been factored into stock prices. Some analysts in Hina’s survey highlight that it is expected that Obama’s victory will cause euphoria on the domestic exchange at the very beginning of trading, but by the afternoon, a calming down is possible as many investors will want to capitalize on their gains.

Commenting on yesterday’s strong rise of the Crobex, primarily due to a significant jump in the prices of shipping and construction stocks, Vorkapić believes it is difficult to speak of a longer-term trend at this point. “Yesterday’s rise of the Crobex is influenced by trends in the global market. A larger portion of global public attention is currently more focused on the U.S. presidential elections than on the crisis shaking the world, which fuels euphoria in the markets.

However, very poor macroeconomic indicators are arriving for most of the largest economies in the world, and companies are announcing significant layoffs. A sobering period will follow,” notes Vorkapić. In the domestic economy, there is already a feeling of difficult borrowing for both companies and citizens, which could soon reflect on the real sector, Vorkapić believes for Hina’s financial service.